It's 5:18 AM London time, with ten days to go before March 29, 2019. Thus it seemed like a not completely inopportune moment to share the following blog post from last fall:
“We thought that we had the answers, It was the questions we had wrong” U2. Lyrics to “11 O’Clock Tick Tock” Under A Blood Red Sky, 1983.
My highlighted PDF copy of Dodd Frank (1) notes that Section 619 (“Volcker Rule”) runs from pages 246-257. Thus, it’s
11 pages long.
It truly captures the imagination and attention then, when:
“On July 17, 2018, the Agencies published in the Federal Register a notice of proposed rulemaking (proposal) that would amend the regulations implementing section 13 of the Bank Holding Company Act. Section 13 contains certain restrictions on the ability of a banking entity and nonbank financial company supervised by the Board to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund. The proposed amendments are intended to provide banking entities with clarity about what activities are prohibited and to improve supervision and implementation of section 13. In response to requests from commenters regarding issues addressed in the proposal, the public comment period has been extended for 30 days until October 17, 2018.” (2)
To summarize, by extending the time to comment on the proposed amendments, interested parties would have more time to review and analyze the somewhat lengthy proposal on proposed changes to the “Volcker Rule”.
However, rather than analyzing the proposal, I found myself considering whether an argument can be made to strike section 13 of the Bank Holding Company Act (entirely or otherwise) on the basis of the constitutional doctrine of “Unconstitutional Vagueness” (3).
To construct a framework for such an inquiry, one must parse the task into two sequential legal analyses; let’s call them 1.) a threshold question and 2.) a substantive question.
The Threshold question is:
Is section 13 of the Bank Holding Company Act (ie Section 619 Dodd Frank, ie “The Volcker Rule”) subject to constitutional review (4)?
The Substantive question is:
Is section 13 of the Bank Holding Company Act (ie Section 619 Dodd Frank, ie “The Volcker Rule”) vague and if so,
Does it rise to the level of “Unconstitutional Vagueness”?
The 1st question is important because if the answer to it is not “yes” there is no point in going to the 2nd question. (IE, “even if it is unconstitutionally vague, the doctrine is not applicable
bc…” is a contingency we have considered from the outset.) In order to reflect on the threshold question, we should consider relevant Supreme Court caselaw that addresses when and whether legislation is subject to constitutional review.
The seminal caselaw on judicial review is Marbury v. Madison, 5 U.S. 137, (1803) which established judicial review. Incidentally, it’s around five pages long. The readers of this blog post are encouraged to more profoundly consider what arguments may exist for and against our threshold question of whether Dodd Frank generally or the Volcker Rule specifically is subject to judicial review.
Okay, 2nd question :)
Is Volcker vague?
If it is vague, does such vagueness rise to the level of unconstitutional vagueness, such that it should be struck down, ala Marbury v Madison?
With regard to our 2nd question, it’s important to understand why the doctrine of unconstitutional vagueness exists in the 1st place. It’s about due process, which is super important in our judicial system.
Here is an excerpt from an early 20th century tobacco case:
Collins V Kentucky 234 U.S. 634, 637 (1914):
“no standard of conduct that it was possible to know; that it violated the fundamental principles of justice embraced in the conception of due process of law in compelling men on peril of indictment to guess”
In other words, when a law (which when broken leads to enforcement) has a standard that is unknowable, it is a violation of due process.
Another way to say this is: if it’s impossible to tell whether or not one has broken the law, that’s just not fair, and thus repugnant to our
system of law.
After running some searches, around twenty SCOTUS cases emerged(5) as those that are oft cited when the courts seek insight on what the SCOTUS thinks about “unconstitutional vagueness”. One thing that this short list tells us is that “unconstitutional vagueness” is a doctrine that the court has not considered with frequency.
Some things to consider when perusing the cases is whether or not the parties in those cases are anything like the potential parties in our scenario and also, how analogous (or not) our theoretical argument is to the facts and circumstances in the various cases. Another thing to generally consider is whether, in the absence of controlling law, a successful case can be brought at all.
Again, will leave it to the reader of this blog post to consider whether a legal challenge of the type above described would be met with success and what costs and risks(6) would otherwise attend such an endeavor.
Happy autumn all! 🌇
1. Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203 et seq, (2010) link to act: https://www.law.cornell.edu/topn/dodd-frank_wall_street_reform_and_consumer_protection_act
5. Please see link to case table: https://docs.google.com/spreadsheets/d/1ir9IQ52pchZqGe7RrGUq4pquvRkQYsmloNYw0Huh16Q/edit?usp=sharing
6. Please enjoy: https://www.pokernews.com/strategy/understanding-what-it-means-to-be-pot-committed-20050.htm
(Reprint. Original date of publication: 10.16.2018 http://stanza28.blogspot.com/2018/10/we-thought-that-we-had-answers-it-was.html )
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